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Recent Activity—International Monetary Fund

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
June 1970
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Special Drawing Rights

Transactions and operations in Special Drawing Rights (SDR’s) in the first three months of the new facility totaled 300,589,000 units. SDR’s equivalent to $3,414 million (each SDR unit is equivalent to 0.888671 gram of fine gold, i.e., the gold content of 1 U.S. dollar) were allocated among 104 participants in the Fund’s Special Drawing Account on January 1, 1970. SDR’s used during the first quarter included transactions between participants, and operations between participants and the General Account of the Fund. Under its recently amended Articles of Agreement, the Fund is authorized to accept SDR’s from members in repayment of previous purchases from the General Account as well as to meet various charges.

The major recipient of SDR’s during the quarter was the United States. Its SDR holdings on March 31 were 53,446,000 above the initial U.S. allocation. Other recipients were Germany, Belgium, Canada, Italy, Japan, the Netherlands, and a number of developing countries: Algeria, Chile, Congo, Korea, Malaysia, Mexico, Venezuela, and Zambia.

PARTICIPANTS’ SDR POSITIONS

(As of March 31, 1970. Amounts Expressed in Millions of SDR’s 1)

SDR Holdings
ParticipantsAllocations

(Jan. 1,

1970)
Net Receipts

or Net Use(-)
AmountPercent of

Allocations
Industrial Countries2,276.226.52,302.7101
United States866.953.4920.3106
United Kingdom409.9-105.2304.774
Industrial Europe753.358.8812.1108
Austria29.44.433.8115
Belgium70.99.079.9113
Denmark27.427.4100
France165.5165.5100
Germany (Fed. Rep.)201.620.0221.6110
Italy105.015.0120.0114
Luxembourg3.23.2100
Netherlands87.48.495.7110
Norway25.22.027.2108
Sweden37.837.8100
Canada124.38.8133.1107
Japan121.810.7132.5109
Other Developed Areas284.8-20.0264.793
Finland21.01.022.0105
Greece16.8-16.8
Iceland2.52.5100
Ireland13.413.4100
Malta1.71.7100
Spain42.042.0100
Turkey18.118.1100
Yugoslavia25.2-12.213.052
Australia84.04.088.0105
New Zealand26.426.4100
South Africa33.64.037.6112
Less Developed Areas853.1-154.0699.082
Latin America330.0-23.6306.493
Argentina58.858.8100
Bolivia4.94.9100
Brazil58.858.8100
Chile21.01.022.0105
Colombia21.0-18.92.110
Costa Rica4.2-1.03.276
Dominican Republic5.4-5.3.11
Ecuador4.2.33.993
El Salvador4.24.2100
Guatemala4.24.2100
Guyana2.5-1.01.560
Haiti2.5-1.11.558
Honduras3.23.2100
Jamaica6.46.4100
Mexico45.42.047.4104
Nicaragua3.2-.13.198
Panama4.7-1.43.369
Paraguay2.52.5100
Peru14.314.3100
Trinidad & Tobago7.47.4100
Uruguay9.29.2100
Venezuela42.02.544.5106
Middle East77.4-46.530.940
Cyprus3.43.4100
Iran21.021.0100
Israel15.1-15.1
Jordan2.72.7100
Southern Yemen3.73.7100
Syrian Arab Republic6.4-6.4
United Arab Republic25.2-25.0.21
Other Asia277.7-72.0205.774
Afghanistan4.94.9100
Burma8.1-.18.099
Cambodia3.2-1.61.650
Ceylon13.1-12.01.18
China, Rep. of2
India126.0-3.3122.797
Indonesia34.8-34.6.1
Korea8.42.010.4123
Laos1.7-1.2.530
Malaysia21.02.323.3111
Pakistan31.6-5.026.684
Philippines18.5-18.5
Viet-Nam6.66.6100
Other Africa168.0-12.0156.093
Algeria12.61.514.1112
Botswana.5.5100
Burundi2.5-.22.391
cameroon3.13.1100
Central African Rep.1.61.6100
Chad1.71.799
Congo, People’s Rep. of the1.71.7100
Congo, Dem. Rep. of15.1.515.6103
Dahomey1.71.7100
Equatorial Guinea1.01.0100
Gabon1.61.6100
Gambia, The.8.8100
Ghana11.611.6100
Guinea3.23.2100
Ivory Coast3.23.2100
Kenya5.45.4100
Lesotho.5.5100
Liberia3.4-.62.882
Malagasy Republic3.23.2100
Malawi1.91.9100
Mali2.9-1.01.967
Mauritania1.71.7100
Mauritius2.72.799
Morocco15.115.1100
Niger1.71.7100
Nigeria16.816.8100
Rwanda2.5-1.01.559
Senegal4.24.2100
Sierra Leone2.5-2.0.519
Somalia2.52.5100
Sudan9.6-9.4.22
Swaziland1.01.0100
Tanzania5.45.4100
Togo1.91.9100
Tunisia5.9-.25.797
Uganda5.45.4100
Upper Volta1.71.7100
Zambia8.4.58.9106
Country Total3,414.0-147.63,266.5
Fund Holdings147.6147.6
Total3,414.003,414.0

SDR is defined as equivalent to .888671 gram of fine gold, i.e., as equivalent to the US dollar at its present par value.

Fund members that are not participants in the Special Drawing Account are: Ethiopia, Iraq, Kuwait, Lebanon, Libyan Arab Republic, Nepal, Portugal, Saudi Arabia, Singapore, and Thailand. China is a participant but did not wish SDR’s to be allocated to it for the first period.

SDR is defined as equivalent to .888671 gram of fine gold, i.e., as equivalent to the US dollar at its present par value.

Fund members that are not participants in the Special Drawing Account are: Ethiopia, Iraq, Kuwait, Lebanon, Libyan Arab Republic, Nepal, Portugal, Saudi Arabia, Singapore, and Thailand. China is a participant but did not wish SDR’s to be allocated to it for the first period.

The largest single use of SDR’s during the period was made by the United Kingdom in an amount totaling 105,232,100 units. Over 85 million of this transfer was with the General Account in respect of repurchases of earlier drawings and payment of charges. The United Arab Republic used 25 million of its original 25.2 million allocation in January and in the same month the Philippines and Israel fully used their initial allocation of 18.5 million and 15.1 million, respectively. Greece used its initial allocation of 16.8 million SDR’s in January and February, and the Syrian Arab Republic used its 6.4 million SDR allocation in February. Indonesia used 34.6 million SDR’s during February and March, almost the total of its initial allocation, and Colombia utilized 18.9 million SDR’s in March in a repurchase transaction with the General Account. Other countries making use of SDR holdings during the first quarter were Burma, Burundi, Cambodia, Ceylon, Chad, Costa Rica, the Dominican Republic, Ecuador, Guyana, Haiti, India, Korea, Laos, Liberia, Mali, Mauritius, Nicaragua, Pakistan, Panama, Rwanda, Pierre Leone, Somalia, the Sudan, Tunisia, and Yugoslavia.

The Fund’s own holdings of SDR’s rose from zero at the start of January to 147.6 million on March 31 as some members used SDR’s to repay previous purchases of foreign currency from the Fund and to meet various charges.

Increase of Quotas

The Fund announced in February that a Resolution for increasing members’ quotas had been approved by Governors representing more than the required 85 per cent of total voting power in the Fund. Now that the Resolution has been adopted, it remains for individual countries to consent, in accordance with their law, to the increases in quota up to the respective maxima proposed for them. A member will be able to consent to an increase in its quota at any time on or before November 15, 1971, unless this period is extended by the Executive Directors. However, no increase will take effect before October 30, 1970.

Changes of Par Value

On January 30 the United Kingdom and the Fund agreed upon a par value for a new monetary unit in Bermuda, and a change in the par value of the Bahamian dollar. The Bermuda dollar, a new decimal currency unit to replace the Bermuda pound, came into effect on February 6 with a par value of 1 Bermuda dollar equivalent to US$1.00. The par value of the Bermuda pound was 1 Bermuda pound equivalent to US$2.40. A new par value for the Bahamian dollar of 1.00 Bahamian dollar per US$1.00 took effect on February 2, 1970. Its previous par value was 1.02041 Bahamian dollars per US$1.00.

DRAWINGS BY FUND MEMBERS DURING THE FIRST QUARTER OF 1970
MEMBERMONTHAMOUNT

($ millions)
AfghanistanFebruary2.00
BurmaJanuary12.00
CeylonFebruary5.00
ChadJanuary3.78
ColombiaMarch6.25
FranceFebruary485.00
IrelandMarch20.00
LiberiaJanuary1.00
MaliMarch0.75
PhilippinesMarch18.00
TunisiaJanuary2.50
United KingdomMarch150.00
Total drawings in the first quarter of 1970706.28
Total net drawings at the end of the first quarter of 19705,527.56

Gold

Gold holdings of the Fund rose from $2,568.7 million at the end of December 1969 to $2,760.9 million on March 31. The increase reflected purchases of South African gold worth over $282 million made under the new arrangements with that member announced on December 30, 1969 (see Finance and Development, March 1970).

Purchases and Repurchases

Purchases of foreign currencies from the General Account of the Fund during the first quarter totaled $706.3 million and repurchases by repayments of currency totaled $481.5 million. Purchases during the three months included $485 million by France in February under the stand-by arrangement of September 1969. To help finance that purchase, the Fund called upon four participants (Canada, Italy, Japan, and the Netherlands) in the General Arrangements to Borrow, who extended credits to the Fund in their respective currencies equivalent to $93.5 million to replenish the Fund’s holdings of currencies used for the purchase. The Fund also sold $98.5 million of gold to 12 countries to help to finance the French transaction. A purchase in March by the United Kingdom of $150 million was the final drawing under its $1 billion stand-by arrangement which went into effect on June 20, 1969. In January the Fund announced a $3.8 million purchase by Chad to improve that country’s balance of payments position.

Repurchases included a total of over $338 million by the United King dom in respect of purchases in 1965, and voluntary repurchases by India ($49.5 million) and Colombia ($18.9 million) of purchases made under the Fund’s compensatory financing facility.

Stand-By Arrangements

Five stand-by arrangements were approved during the first quarter of the year. The largest of these was Brazil’s arrangement for $50 million in support of a financial program aimed at maintaining a high rate of growth, a satisfactory balance of payments position and greater internal price stability. The arrangement was the sixth in support of the present series of programs in Brazil for achieving financial equilibrium. The Philippine standby arrangement of $27.5 million was to assist efforts to correct the imbalance in that country’s payments position. The stabilization program included an exchange reform which involved establishment of a free exchange market for all international transactions, with the exception of 80 per cent of the proceeds from specified leading export products which will continue to be surrendered at the present par value rate of 3.90 Philippine pesos per U. S. dollar.

The $25 million stand-by arrangement for Korea in March was also in support of a stabilization program directed toward continued economic progress. Korea’s exceptionally high rate of growth in 1969 was accompanied by the emergence of inflationary pressures which the financial program for 1970 seeks to control. Korea has had successive stand-by arrangements with the Fund since 1965.

FUND STAND-BY ARRANGEMENTS APPROVED DURING THE FIRST QUARTER OF 1970
MEMBERMONTHAMOUNT

($ millions)
BrazilFebruary50.001
KoreaMarch25.00
PanamaFebruary10.00
PhilippinesFebruary27.50
SomaliaJanuary3.98

Brazil’s stand-by arrangement for $50 million effective April 29, 1969, which had not been utilized, was cancelled as of February 4, 1970.

Honduras’ stand-by arrangement for $11 million effective February 1, 1969 was extended through April 30,1970.

Brazil’s stand-by arrangement for $50 million effective April 29, 1969, which had not been utilized, was cancelled as of February 4, 1970.

Honduras’ stand-by arrangement for $11 million effective February 1, 1969 was extended through April 30,1970.

A $10 million stand-by arrangement in February for Panama was to assist the national authorities to strengthen the country’s fiscal situation, as well as the liquidity position of the National Bank. Somalia’s $3.98 million stand-by arrangement was to sustain its liberal system of exchange and imports and to provide a line of reserves to meet contingencies brought about by an anticipated reduction in foreign aid and a possible decline in livestock exports following a recent drought.

Democratic Republic of Congo

In the issue of March 1970, the information given in the article “Foreign Investment Legislation in Africa” relating to the Democratic Republic of Congo was not up to date. A new Investment Code was issued in June 1969, offering extensive new facilities for investors. Under this the Government, in particular, guarantees the transfer of the annual profits from, and dividends on foreign investments, including reinvestments, made under the provisions of the new Code, as well as the repatriation of proceeds from the liquidation of such investments.

While the law on the acquisition of real estate in the Democratic Republic of Congo specifies that real estate may be purchased only by the Congolese Government, it is understood that in practice when a sale of real estate to a foreigner is proposed, the Government may or may not exercise its option to purchase and that sales to foreigners are in fact authorized.

Articles appearing in Finance and Development may be quoted or reprinted in their entirety, provided that due acknowledgment is made. The Editor would be glad to receive two copies of publications containing such reprints or quotations.

For the present, there is plenty of food in this Latin American market. But population is outpacing the world food supply. As it crosses the threshold of the 1970’s, the World Bank Group is in the midst of yet another, and sharper, upswing in agricultural lending. The Bank’s expanding role is outlined in “Agricultural Development” in this issue.

The Headline-Making Pearson Commission Report

The Report of the Commission, on. International Development

Lester B. Pearson, Chairman

The full report of the Commission established by the World Bank in response to the crisis of declining foreign aid appropriations. Under the direction of Lester B. Pearson, former Prime Minister of Canada, the Commission presents its findings and recommendations “with fresh clarity, candor and conviction…. The fate of this crucial report and of the world community for which it pleads depends on the response it evokes in Washington.”—lead editorial in The New York Times of Sunday, October 5, 1969.

“I am convinced that it will become one of the most important documents of the twentieth century.”—British Prime Minister Harold Wilson.

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